How Do I Qualify for a Car Loan in Pennsylvania?

So, you might be wondering, how do I qualify for a car loan in Pennsylvania? If you're asking this question, you probably haven't had a car loan before. Or perhaps you just moved to Pennsylvania and wonder if the rules are different. Either way, we created this article to help guide you through the process of qualifying for a car loan.

What Is a Car Loan?

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You can describe a car loan as an agreement between you and a bank or lending institution to loan you the money to buy a specific car. Lenders don't automatically approve loans. Instead, they adhere to a strict process that reviews your credit history, income, and debt to determine your creditworthiness.

Banks will loan you a certain amount based on your submitted criteria, not a blank check to buy whatever you like. You also qualify for an interest rate that determines how much the loan will end up costing you over time. Interest represents the lender's profit for providing you the money to buy the car. They assume the risk by providing you with the money and want something in return. That's normal and expected. How high an interest rate you get also depends on your creditworthiness.

Any car loan you secure will have a term, basically defined as how long a period you have to pay the lender back. This might be the only negotiable factor of a car loan for borrowers. Be careful taking out a loan for too long a period, as trouble can arise. We'll touch on that later.

Create a Budget

We strongly suggest you calculate what you can afford every month in a car payment. If you have an existing car loan, you probably have a good idea already. If not, see what money remains after you pay your bills. Then, add your car insurance, fuel, and at least a little for maintenance. If you buy a used car, you should budget more for maintenance as older cars require more. The last thing you want to do is sign a loan for that dream car, only to find out you can't afford to put gas in it or have little left over to go to dinner or see a movie.

Check Your Credit Score

You've created a budget. Now it's time to check your credit score. You can do this for free online. Many people find erroneous information on their credit report, either negative entries that don't belong to them, or worse, someone has hijacked their identity. Regardless of what you find, you should always fix your credit before applying for a loan. The lower your credit score, the higher the interest rate you'll end up with, which costs you more money.

If you absolutely need a car today, that's okay. Many lenders offer car loans to those with less than perfect credit. In fact, Apple Nissan has a guaranteed credit approval program for just such occurrences. In addition, our finance managers have many relationships with lending institutions that specialize in high-risk loans.

Get Pre-Approved for a Loan

Many people mistake shopping for cars before they shop for a loan. This can result in several problems. First, you could end up disappointed that you didn't qualify for a large enough loan to buy the car you fell in love with before applying. Many buyers experience this frustration. You also might end up not getting any approval.

That's why at Apple Nissan, we encourage our customers to take advantage of our streamlined pre-approval finance application online. In just minutes, you'll receive your approval, including your loan amount, monthly payment, and interest rate. Knowing these figures will help you save time by shopping for cars within your budget.

Search for Best Price and Lowest Interest Rate

You look for the best price when you shop for a new pair of shoes. You should do the same when shopping for a car loan. Not all lenders are created equal. Check around to see who offers the lowest interest rates. The lower the interest rate, the more money you'll save over the life of the loan.

Also, the loan length can save you money or cost you money, depending on several factors. For instance, a longer-term loan might lower your monthly payment, but you'll end up paying more money over the entire length of the term. Often people find themselves upside down on their loans. 

What Does "Getting Upside Down" On Your Car Loan Mean?

Getting upside down on your car loan means your car has less value than what you owe. Going upside down doesn't necessarily pose a problem by itself. However, if you get in an accident and your car is a total loss, your insurance company will only reimburse you for the actual value of your car, not what you owe. For instance, you could owe $10,000 on your car loan, yet your car actually has a value of $7,500. In this scenario, the insurance company will pay your bank $7,500, leaving you responsible for the $2,500 balance. And you won't have a car to drive.

What is Gap Insurance ?

Gap insurance does what its name implies. It pays the gap between the car's actual value and what you owe. You can purchase gap insurance at any time, but it's far easier to wrap it into your initial deal. We strongly encourage our customers to purchase gap insurance. We offer gap insurance as part of all of our financing deals.